The positive transcription elongation factor b (P-TEFb) is a critical coactivator for transcription of most cellular and viral genes, including those of HIV. While P-TEFb is regulated by 7SK snRNA in proliferating cells, P-TEFb is absent due to diminished levels of CycT1 in quiescent and terminally differentiated cells, which has remained unexplored. In these cells, we found that CycT1 not bound to CDK9 is rapidly degraded. Moreover, productive CycT1:CDK9 interactions are increased by PKC-mediated phosphorylation of CycT1 in human cells. Conversely, dephosphorylation of CycT1 by PP1 reverses this process. Thus, PKC inhibitors or removal of PKC by chronic activation results in P-TEFb disassembly and CycT1 degradation. This finding not only recapitulates P-TEFb depletion in resting CD4+ T cells but also in anergic T cells. Importantly, our studies reveal mechanisms of P-TEFb inactivation underlying T cell quiescence, anergy, and exhaustion as well as proviral latency and terminally differentiated cells.